Passive income is the ideal for millions of investors, and a concept frequently criticized as being too good to be true. The idea is to make an investment, engage in an activity, or create something that allows you to reap ongoing returns—revenue—without much additional input or management. Most of us are used to a system where we make money based on how much we contribute, and where you can’t get something for nothing; the high-level concept of passive income would contradict that standard.
The Realities of Passive Income
Of course, the literal acquisition of “something for nothing” is impossible; passive income isn’t about generating a revenue stream with no input of value, but instead is about minimizing the ongoing effort needed to generate it. Usually, the compensation here is some kind of intensive upfront investment, whether that’s in the form of time or money.
For example, if you invest a sum of money into an index fund designed to pay out dividends, you’ll be able to reap a percentage of your investment as income (and hopefully make even more from the increasing value of the fund). Or, if you invest in rental property, you’ll likely be able to take in more via rent than you pay in ongoing expenses.
But what if you don’t have any upfront capital to spend, or want to establish a passive income stream without making an initial investment?
Options for Passive Income Without Capital
You still have options to build a passive income stream, either by securing capital elsewhere or by investing time, rather than money. These are just some of the ways you can do it:
- Reduce property costs. Rental property remains one of the easiest and steadiest ways to make a long-term profit, so don’t discount it just because it typically requires a high upfront payment. There are many options available to you if you don’t want to front the cost yourself. You could get a mortgage that requires a lower down payment, you could choose a lower-cost property, or you could even jointly buy a property with another investment partner.
- Write a book. If you’re talented at writing, or if you have a subject you happen to know a lot about, you could try writing a book to distribute online. If you sell the eBook for a few dollars a copy, and manage to generate enough traffic for it on a consistent basis, you could reap a few hundred dollars a month off your once-only time investment.
- Start a blog. If you’re good at writing, but don’t like the idea of investing all your time in a comprehensive book, consider starting a blog. This method will require some extra ongoing work, but is completely free to start and has fewer upfront requirements. Once you get a consistent audience, you can monetize your blog with ads or affiliate links.
- Create a YouTube channel or podcast. If writing isn’t your style, you can create your own YouTube channel, making entertaining or informative videos, or start a podcast on a similar topic for an audio-only experience. Again, these channels will require some ongoing work, but if you can attract a decent audience, you stand to make a decent income stream from either one (or both).
- Rent a room. If your house has an extra room that isn’t being used, consider renting it. You could seek a long-term tenant or roommate to live in the house with you, or fix it up so you can list it for temporary stays on a platform like Airbnb. You’ll have some cleanup responsibilities, but the ongoing work here is minimal.
- Use drop shipping with an online store. Finally, you could set up an online storefront that operates via drop shipping; essentially, you’ll take orders and forward them to a manufacturer, who will take care of processing and shipping the orders. As long as you charge your customers slightly more than you pay for the processing and shipping, you’ll break a regular (and passive) profit. The trick is to find a way to generate more traffic to your storefront, and outcompete any similar businesses you find along the way.
Passive income is never 100 percent passive; there’s always some initial requirement for investment, but that investment doesn’t have to be capital-intensive. As long as you’re committed to one or more of these strategies, and are willing to put the time into making them successful, you can create more income for yourself—possibly for years to come.